Correlation Between MaxLinear and NLIGHT

Can any of the company-specific risk be diversified away by investing in both MaxLinear and NLIGHT at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MaxLinear and NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MaxLinear and nLIGHT Inc, you can compare the effects of market volatilities on MaxLinear and NLIGHT and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MaxLinear with a short position of NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of MaxLinear and NLIGHT.

Diversification Opportunities for MaxLinear and NLIGHT

0.29

Correlation Coefficient

MaxLinear  NLIGHT

Modest diversification

The 3 months correlation between MaxLinear and NLIGHT is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding MaxLinear and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc and MaxLinear is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MaxLinear are associated (or correlated) with NLIGHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nLIGHT Inc has no effect on the direction of MaxLinear i.e., MaxLinear and NLIGHT go up and down completely randomly.

Pair Corralation between MaxLinear and NLIGHT

Considering the 90-day investment horizon MaxLinear is expected to under-perform the NLIGHT. In addition to that, MaxLinear is 2.61 times more volatile than nLIGHT Inc. It trades about -0.13 of its total potential returns per unit of risk. nLIGHT Inc is currently generating about -0.27 per unit of volatility. If you would invest  1,125  in nLIGHT Inc on November 28, 2024 and sell it today you would lose (149.00) from holding nLIGHT Inc or give up 13.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

MaxLinear  vs.  nLIGHT Inc

MaxLinear

Risk-Adjusted Performance

Very Weak

Over the last 90 days MaxLinear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, MaxLinear is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

nLIGHT Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days nLIGHT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with MaxLinear and NLIGHT

The main advantage of trading using opposite MaxLinear and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MaxLinear position performs unexpectedly, NLIGHT can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NLIGHT will offset losses from the drop in NLIGHT's long position.

The idea behind MaxLinear and nLIGHT Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.